IF THESE WALLS COULD TALK: Centre of attention

Centre Point, the famous London landmark, has been sold again to private equity-style investors. PERE Magazine, June 2011 issue

As any shopper on London’s Oxford Street knows, the east side is bookended by an office tower made famous by its pre-cast concrete cladding that apparently reduced the need for scaffolding during its construction in the 1960s.

Centre Point, located at the junction of Oxford Street and Tottenham Court Road, is a landmark not just for shoppers but for anyone visiting London as it soars 35 stories high. In fact, it was one of London’s first skyscrapers, although a couple dozen buildings have eclipsed it since then. It also was one of the first fully air-conditioned offices in the city, a rarity at the time of its construction.

Despite its historical significance, the property has had its fair share of controversy. The building became infamous in 1974 when it became a symbol of – and potential remedy for – London’s housing crisis. That January, protesters occupied the vacant 292,563-square-foot building for two days to bring attention to the plight of the homeless in the city.

The building also has been slammed for its architecture, and even its developer, Harry Hyams, has attracted criticism for allegedly keeping the building empty as he waited for a single tenant to occupy it.

Hyams, however, vehemently denies such accusations. The reclusive developer successfully sued the Financial Times over an article appearing on 6 July 2009 that claimed he intentionally kept the building empty to boost its value, and the newspaper accepted the allegation was without foundation and paid his legal costs.

The building also has enjoyed a colourful history of subsequent owners, not least because it has entered into the hands of private equity real estate-style investors not once but twice in the span of 11 years.

In July 2000, Centre Point was sold as part of the so-called Oldham Estates portfolio by property company MEPC to The Blackmoor Limited Partnership for £495 million (€569.1 million; $797.9 million). The consortium behind the partnership included Apollo Real Estate, before it changed its name to AREA Property Partners; Sir John Beckwith’s Europa fund, which later became fully independent as Europa Capital Partners; Deutsche Bank; and Pelham Partners, the firm that Roger Orf used to run before joining Lone Star Funds and later Citi Property Investors.

The consortium held onto the property for five years, eventually deciding to exit the investment in 2005. By that time, the building had been refurbished and had an application for a restaurant on the top two floors submitted to Camden Council. About 20 percent of the space was vacant with the rest let to around 25 tenants, including the Higher Education Funding Council for England.

This is where the credit crunch and Centre Point coincided. The private equity real estate consortium sold the building to a fast-rising private property company from Norwich called Targetfollow, headed by entrepreneur Ardeshir Naghshine, which was busy riding the cheap debt wave.

Targetfollow added Centre Point to its burgeoning portfolio for £85 million and pursued plans to improve it. According to reports at the time, the company actually held back letting some of the empty floors because it thought it could do better than the £34 per square foot potential tenants were offering. Indeed, it believed that local evidence showed £40 per square foot could be achieved. Perhaps the most ambitious plank of the plan was to assess the potential for a second tower on a podium next to Centre Point, though that never materialised.

Unfortunately for Targetfollow, its investment did not have a happy ending. Despite protestations that he had secured £150 million of fresh capital, Naghshine found himself at the wrong end of a decision by lender Lloyds Banking Group to push the property company into administration. Lloyds reportedly was owed £700 million in total by the group.

The upshot was Centre Point came up for sale again this year, and a newly established private equity real estate-style firm bought the building last month. Almacantar – founded by Mike Hussey, the former London portfolio manager at Land Securities, and Neil Jones, the former chief executive for Continental Europe at Grosvenor Group – has made Centre Point its first acquisition.

Established in February 2010, Almacantar reportedly has raised €150 million in equity from investors. Some €100 million of that is said to be from EXOR, the investment vehicle of the Agnelli family, which owns a 72 percent stake in property services firm Cushman & Wakefield.

In other words, Center Point is now owned by a private equity real estate company utilising an investment club structure. That is a real sign of the times.